Cheque clearing times across UK bank accounts are to be standardised in the final ruling by the Office of Fair Trading's Payments Systems Task Force, which is to be wound up and replaced by an independent body.
The Payments Industry Association will be the new strategic governance body, and will concentrate on access, innovation and governance issues. It will include four independent non-banking directors, alongside eleven senior bank executives, as well as an independent chairman - Brian Pomeroy, a former senior partner at Deloitte Consulting. The independent directors will collectively have the power to veto proposals.
Jonathan May, OFT chairman of the Payment Systems Task Force, comments: "The creation of the Payments Industry Association is good news for both consumers and businesses. It will provide strategic direction to the development of payment systems in the UK and its strong governance arrangements will ensure that the needs of users are taken fully into account."
The news has been well received by consumer groups. Ashleye Gunn, head of Money research at Which? comments: "Which? welcomes the establishment of the PIA as a direct result of consumer concern. However, we will be watching this association closely to ensure it is meeting its objectives at all times."
The move to provide certainty in cheque clearing times for withdrawals and deposits has also been welcomed. Philip Cullum, deputy chief executive of the National Consumer Council (NCC) says: "Britain’s centuries-old cheque clearing system has for too long been slow and confusing. Today’s announcement is a positive step that will benefit many consumers – offering them greater certainty and better service."
The main proposed changes are: money deposited into any account will start to earn interest or will count against overdrafts no later than two working days after the cheque is deposited and all consumers and businesses will be able to withdraw funds deposited by cheque into current and basic bank accounts no later than four working days after the cheque is deposited.
Significantly, the Task Force concluded that there is no case for a complete rebuild of the cheque clearing system. Research shows that the number of cheques in circulation is falling by around eight per cent per year, and this rate of decline is likely to increase substantially when the new faster payments service for phone and Internet payments becomes available in November 2007. In addition, several major retail groups are either trialling not accepting cheques as a payment mechanism at their tills or have stopped taking cheques altogether.